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Commentary: This NAFTA rewrite should boost Midwest exports

October 5, 2018

President Donald J. Trump congratulates U.S. Trade Representative Robert Lighthizer as he delivers remarks on the United States Mexico Canada Agreement.

Donald Trump’s approach to trade policy, as with many topics, is different from that of past presidents. His scripts typically include plenty of threats, complaints and drama, designed not just to get his way but to keep the public engaged.

Not being drama critics, we’ll let others judge the entertainment merits of his strategy. But when it comes to tangible results, his renegotiation of NAFTA has worked better than his detractors expected.

The new United States-Mexico-Canada Agreement, or USMCA, came to fruition in cliffhanger talks with Canada that ended Sunday. It retains most of the valuable parts of the 1994 trade deal, which was designed to facilitate more commerce and greater economic integration among the United States, Canada and Mexico. Under it, trade among the three has grown from about $290 million to $1.2 trillion.

But as you would expect of an economic compact drafted before the internet, email and mobile phone use became part of every facet of life, it was due for a renovation to accommodate changes in these North American economies. The ones agreed on by the three governments in recent months reflect that need.

For the Midwest, NAFTA has been a boon. Automakers have gained from being able to make and assemble different components wherever efficiency dictates. With some tweaks — which, regrettably, will make it more expensive to build vehicles in Mexico — the new accord largely preserves that system.

It’s no accident that the two biggest customers for U.S. exports are Canada and Mexico, and sales have grown at a solid pace in recent years.

That corn you see being harvested when you drive through the countryside? In a normal year, about 40 percent of it is shipped to our North American neighbors. A tariff war with either or both of them, which might have erupted had the talks failed, would have taken a heavy toll on heartland farmers.

There are other useful steps, notably stronger protections for intellectual property, which is a particular U.S. strength. Canada and Mexico obtained commitments that they won’t be subject to the 25 percent auto duties Trump has threatened to impose on other countries.

He won a big concession by persuading Ottawa to take steps to open up its highly protected dairy industry — which has long blocked U.S. competition with import quotas and tariffs as high as 300 percent. We take it as good news that Dairy Farmers of Canada immediately denounced the change. Wisconsin and other Midwest dairy farmers, who lost sales after Canada tightened its rules last year, are likely to take a more positive view.

Trump correctly dropped his demand to get rid of the independent tribunals set up in the original treaty to resolve disputes about trade policy. Some trade hawks see them as an infringement on American sovereignty, but they serve to ensure a fair process to everyone. Keeping them was perhaps the highest priority for Canadians — who otherwise would have to litigate in American courts, where U.S. companies would enjoy a home-field advantage. The panels function to promote free commerce under established rules, something that benefits all three nations.

NAFTA created a mostly open continental market that fosters trilateral growth, cooperation and progress — and, not least important, Midwestern prosperity. In concluding the new pact, the administration deserves credit for preserving that fundamental achievement.

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